Eskom has massed R419bn of debt in the past 10 years

South African electricity power utility Eskom is going to a rough phase as it is currently facing a number of challenges, including low revenues, escalating overhead costs, increasing debt, low-quality coal stockpiles, unplanned breakdowns, and deteriorating power plants.

The company continues to rack up debt as it puts effort to provide enough power for the national grid. It massed R419bn of debt in the past 10 years and the amount is projected to rise to R600bn in the next five years if appropriate measures to control the debt levels are not taken.

To get over the debt cliff, Eskom, which produces more than 90 percent of the country’s electricity supply, has demanded for a 15 percent annual increase in electricity prices for three consecutive years.

Addressing the hearing held by the National Energy Regulator of SA (Nersa), Eskom CEO Phakamani Hadebe said three years of substantial tariff hikes and a massive government bailout is necessary to pull the power utility from the debt cliff.

The company’s application to increase power tariffs will be required to meet Nersa’s approval before it can be applied to customers.

Addressing the businesses community and the public during a breakfast in Rosebank on Wednesday, President Cyril Ramaphosa said that government was taking necessary steps to address challenges faced by Eskom as it remained an albatross around the country’s neck.

“We are confronted by the Eskom challenge again, but this time we are taking measures to address it,” Ramaphosa said, reported IOL.

He said the government’s task team, appointed to deal with problems at Eskom, has already come up with a number of proposals on how to restructure Eskom.

“There is a glimmer of light at the end of the tunnel as to what we need to do to stabilize Eskom. We can safely say that Eskom is being handled and we will eventually put its challenges aside,” the President added.

Ramaphosa will lead a delegation of government, business and labor leaders to the World Economic Forum (WEF) Davos annual meeting in Switzerland.